Will fuel prices go up in 2009?

[stevesnj]

Do you think we are just in a temporary dip in fuel prices? Personally I think that higher prices will return. IMHO

 

[Botch]

The whole world economic/political/financial/environmental situation is in such an upheaval right now, that I'd say, Yeah they'll go up, Yeah they'll go down too, and who knows where we'll all be twelve months from now?

 

[Oscar54]

The sharp swing in prices proves that the price run up had nothing to do with supply and demand, except maybe for Futures Contracts, but not physical oil.

The Oil Companies and Hedge Fund speculators drove the world economy into a ditch while making trillions for themselves. These guys are the straw the broke the camels back, if they had not so recklessly drove up the price of oil less of these people in marginal mortgages may have been driven to bankruptcy.

So, yes this is just a respite but I'm not sure they will push it up again anytime soon, at least not until the Dow gets back above 10,000.

 

[cv_rider]

I heard an interview on NPR today with an oil analyst, saying that the wild fluctuations has everything to do with supply and demand. Prior to the economic implosion, demand outpaced supply by a small amount. That drove the prices way above what they historically had been. Small fluctuations in demand (such as people carpooling a bit more) has a very big impact on prices. With the economy in the toilet, demand has dropped somewhat, as have prices. As soon as the economy recovers, the price will be where it was, and then soon beyond. There's a huge middle class rising in India and China that likes the convenience of driving too. This (in conjuction with the US's continued consumption of 25% of the world's oil) will result in a steady-state high demand, and what we're seeing right now is an aberation. And it will go higher. We'll add another 3 billion people in the next centurry, and they will want to drive too.

While I didn't like paying close to $5 gal (here in the SF Bay Area), I never fumed at the oil companies for "gouging." That's just good ol' capitalism at work. The market sets the price, not the oil companies. As consumers, we are setting the price by driving consumptive SUVs that creates a lot of demand. Any private company will seek to get the highest price for their product - that's not a sin and it's not greedy.

 

[GConn]

I heard an interview on NPR today with an oil analyst, saying that the wild fluctuations has everything to do with supply and demand. Prior to the economic implosion, demand outpaced supply by a small amount. That drove the prices way above what they historically had been. Small fluctuations in demand (such as people carpooling a bit more) has a very big impact on prices. With the economy in the toilet, demand has dropped somewhat, as have prices. As soon as the economy recovers, the price will be where it was, and then soon beyond. There's a huge middle class rising in India and China that likes the convenience of driving too. This (in conjuction with the US's continued consumption of 25% of the world's oil) will result in a steady-state high demand, and what we're seeing right now is an aberation. And it will go higher. We'll add another 3 billion people in the next centurry, and they will want to drive too.

While I didn't like paying close to $5 gal (here in the SF Bay Area), I never fumed at the oil companies for \"gouging.\" That's just good ol' capitalism at work. The market sets the price, not the oil companies. As consumers, we are setting the price by driving consumptive SUVs that creates a lot of demand. Any private company will seek to get the highest price for their product - that's not a sin and it's not greedy.

I beg to differ...I believe this last oil price increase we experienced was caused from the derivatives market (i.e. expectations) not demand really. Another fiasco. That's just my opinion though and I can't really support it with evidence. I can't see how oil price went up so much for a small increase in demand...it doesn't make sense.

 

[champion221elite]

The sharp swing in prices proves that the price run up had nothing to do with supply and demand, except maybe for Futures Contracts, but not physical oil.

The Oil Companies and Hedge Fund speculators drove the world economy into a ditch while making trillions for themselves. These guys are the straw the broke the camels back, if they had not so recklessly drove up the price of oil less of these people in marginal mortgages may have been driven to bankruptcy.

So, yes this is just a respite but I'm not sure they will push it up again anytime soon, at least not until the Dow gets back above 10,000.

Well said Oscar

 

[Hellgate]

Much of what we have seen was driven by oil futures, basically investors betting that oil will continue to rise forever. Think tech boom/bust, junk bond boom/bust, CA housing bust in the 1980s, 1990s and now 2008, Beanie Baby boom/bust, oh and the oil bust of the 1980s, etc. The China/India factor does play in but in the near term, I don't think oil at $200 is a true supply and demand figure but instead was a heard mentality number. I suspect we will see oil drop some more, however I think come Spring/Summer it will climb some. My gut feel of where oil should be is between $65 and $75. I also feel that the world is waiting to see the scope of the economic slowdown and to see how/if the various government plans in impact the larger picture.

So yes, oil will rise.

 

[GastonJ]

I voted "Yes" mostly because the governments we have here will always raise the price at every opportunity they get. They're all so used to the income and know that we will pay the price.

That's just been shown as true by the VAT cut of 2.5% here, except that the government then put up the excise duty on it to make it the same price in any case. Keeps government revenues from motorists high in order to pay for the mistakes by banks. The headlines should read "motorists bail out banks" really.

Biggest problem is that there still isn't a real alternative to petrol/gas as yet, so we'll keep paying and watching the price rise as usual, no matter who puts the price up. :spank:

 

[keira]

I voted "yes" because that's how the world works. Things get cheap, demand goes up, prices go up, demand goes down, prices go down. Capitalism 101.

 

[FZ1inNH]

There's one more factor of oil trading at play as well. Oil is the ONLY world commodity that is traded solely on the U.S. dollar. During this drastic rise in price, the dollar was in the tank around the world. Demand comes in next and has been steadily dropping due to the economy and people simply not being able to afford to travel or use recreation vehicles as much. Airplanes were all ordered to throttle back (increasing flight times) to conserve fuel. When the economy returns and people are comfortable spending once again, the demand will rise and so will the price. So long as the dollar stays strong, the price shouldn't go back over $100 a barrel. I'd predict a steady $80 a barrel with a constant +/- $10 on the price fluctuations.

Then.... we have the speculators.... and that is a whole story all by itself. They need to be banned from the markets!

 

[Hellgate]

^^^ Good point, I forgot about the dollar relationship. The dollar is much stronger than a year ago which has a lot to do with the lower price per barrel.

Funny how times were good and people moved away from the dollar, however when times a bad and people move back to the dollar. I think that sums it up right there.

 

[oz1980]

still cheaper than water though!

 

[mikebike]

Supply and demand has a lot to do with it.... ALOT..... demand is WAY down from prior numbers. Even when OPEC cut production by 1 million barrels a day and oil was priced at $73 pbl -- now it is at 54.43

It most likely will migrate up but not to the $147 levels any time soon

 

[cv_rider]

Much of what we have seen was driven by oil futures, basically investors betting that oil will continue to rise forever.

I heard an interview with an economist on the radio, who said that futures traders were not the cause of high oil prices. Their activity, according to the economist, was just noise on the oil price. Future traders are a bogeyman conjured up by Congress so they can blame someone. As long as they have someone to blame, they don't have to try to solve the problem, which would involve making Tough Decisions (increase gas taxes; mandate higher mileage vehicles; make people pay for their emmisions with a carbon tax), which Congress isn't really capable of.

 

[Oscar54]

I heard an interview with an economist on the radio, who said that futures traders were not the cause of high oil prices. Their activity, according to the economist, was just noise on the oil price. Future traders are a bogeyman conjured up by Congress so they can blame someone. As long as they have someone to blame, they don't have to try to solve the problem, which would involve making Tough Decisions (increase gas taxes; mandate higher mileage vehicles; make people pay for their emmisions with a carbon tax), which Congress isn't really capable of.

True that gas taxes, higher mileage, etc. made the impact less in Europe than here since these policies allowed for the development of economical mass transit and just basically reduced the overall % rise in energy cost compared to the U.S. tending to reduce the impact, along with the euro/dollar exchange.

However, all this free market talk is BS when it come to the oil market. While no industry is totally immune to supply and demand, OPEC and the strategic nature of "Oil" make it ripe for monopoly market manipulation. Cartels by definition are anti-free-market!

We can only hope that the Obama Administration will pursue the above items you site, to make another run up of oil less likely.

 

[cv_rider]

Agree that cartels and monopolies distort the workings of the market. That's an OPEC problem, not an Exxon/BP/Shell/etc problem. Too bad we can't take sovereign nations to court.

While facing high prices here in San Jose, a local authority did a study for evidence of gouging. None was found.

 

[Unseen]

I think they'll certainly go up when we get an economic upturn. Oil is getting more scarse and the entire planet is currently hooked on it. Apart from that our economic system is built on perpetual growth, it needs ever more energy input for that. And while we still get that largest part of our energy from oil and gas, prices must go up.

 

[nimzotech]

Supply and Demand - I follow that notion. For now, Bad economy = lower consumer confidence = lower consumer spending = lower guel consumption = lower prices. I believe that the fuel prices will go up in 2009, even tough we will not be out of the economic downfall. Fuel as we know it is getting scarce and Saudi Arabia is our main fuel source. Prices will go up whether we like it or not.

 

[08fz6]

I agree! every things value is way down! Look at homes also... One thing my dad has noticed at his shop, is that every time someone stands up and reminds the people we are in a "recession" spending on toys comes to almost a stand still for a few weeks..... But I think gas prices will go back up, I guess its almost inevitable... the question is when....

 

[08fz6]

Just curious, for those 3 that voted no it wont go up, why do you think that it won't?